“Overall, we see massive growth potential for Genetec’s BESS deployment, underpinned by a structural shift towards renewable energy,” said CGS-CIMB Research.
PETALING JAYA: Genetec Technology Bhd
is entering an exciting growth phase with the potential deployment of its battery energy storage system (BESS) and growing demand for electric vehicles (EVs).
This trend should be supported by the increasing shift towards renewable energy globally.
In a report, CGS-CIMB Research noted Genetec was currently in discussions with a potential customer to deploy over 15-megawatt hour BESS solutions in the second half of 2023.
“Overall, we see massive growth potential for Genetec’s BESS deployment, underpinned by a structural shift towards renewable energy,” the brokerage wrote following a virtual briefing by Genetec’s managing director and co-founder Chin Kim Weng.
“This is an exciting new growth driver for Genetec, leveraging on its experiences in handling energy storage solutions for its key US customer,” it added.
CGS-CIMB Research kept its “add” rating on the counter, with an unchanged target price of RM4.20 based on 31 times the estimated price-earnings ratio for 2024, in line with the Malaysian semiconductor equipment sector’s five-year mean.
“We see higher-than-expected orderbook replenishment, a rise in institutional funds’ holdings, expansion into new customers or segments, depreciation of the ringgit against the US dollar, and potential interest as an environmental, social and governance-related play as potential re-rating catalysts,” it said.
CGS-CIMB Research learnt that Genetec had recently completed the pilot run for its in-house BESS, which was ready to move into the commercialisation phase.
“The group has installed its initial BESS, running on solar energy, at its newly acquired Bangi plant.
“The group said that it has received encouraging enquiries for its BESS solution deployment across various applications, such as data centres, downstream agriculture processing and EV chargers, among others,” it said.
“We are also encouraged to learn that Genetec recorded a record-high RM180mil order book replenishment in the second quarter of financial year ending March 31, 2023, raising its total backlog orders to RM351mil as of end-February 2023,” it added.
CGS-CIMB Research pointed out that almost all of Genetec’s backlog orders came from the EV and energy storage (ES) segments.
“We gathered from management that Genetec added about RM95mil worth of orders from ES, while the balance RM85mil is from the EV segment. The group has also captured nearly 71% of its RM253mil tender book value since November 2022.
“The group is optimistic that it can secure the balance RM73mil of its tender book orders over the next coming quarters,” the brokerage said.
Apart from Genetec’s existing tender book, management highlighted that its leading US-based customer was also looking to expand its battery assembly capacity in North America.
“The group expects to receive favourable order replenishment in the second half of 2023 in preparation for production in 2024.
“We estimate that the initial phase of assembly capacity expansion would be approximately for 100-gigawatt hour assembly in 2024,” CGS-CIMB Research said.
Overall, this should provide healthy order pipeline visibility for Genetec for at least the next two years, it added.
